Tuesday, May 08, 2012

As lawmakers look to scale back retirement benefits for state employees, Chicago Mayor Rahm Emanuel asked them to also consider cutting benefits for workers in his city.

Emanuel presented the broad strokes of his proposal to change the city’s six pension systems to an Illinois House committee today. He proposed:

A freeze on cost of living increases for 10 years. After 10 years, the COLAs would not be figured on a compounded basis.

A phased in contribution increase for employees. Employees currently contribute between 8 percent and 9 percent of their pay depending on which system they are in. Under Emanuel’s plan, that would increase by a percentage point each year for five years. After five years, the average cost employees pay would be 14 percent.

A five year increase in retirement age that Emanuel said would be phased in over time. This change would increase the age to 67 for most city workers and 60 for police officers and firefighters.

The mayor’s proposal would have to be approved by the General Assembly, and it would apply to Chicago’s pension systems for laborers, municipal employees, teachers, police officers, firefighters and park employees.

Emanuel estimated that his plan would eliminate about 40 percent of the city’s $20 billion unfunded pension liability. He said that growing pension costs are crowding out other vital services. “Our taxpayers cannot afford to chose between pensions and police officers or pensions and paved streets or pensions and public health,” he said. “Our pension payment will eventually squeeze out every essential that residents require and a city must provide.”

Emanuel projected that if nothing is done to scale back benefits for city employees, property taxes would have to be increased by 150 percent to keep up with the cost. “I do not believe that property taxes should go up 150 percent. No business will come to the city of Chicago or Chicago land area, and no family will relocate [there].”

He praised Gov. Pat Quinn’s plan to reform the state’s pension system and acknowledged similarities in the underfunding that Chicago pensions and state pensions are facing. He said taxpayers and workers are not to blame. The mayor said that politicians have not been honest with the public in the past about the magnitude of the problem and have made promises to workers that they cannot keep. While his plan shares some components with Quinn’s, he said Chicago has different needs. “We are facing problems that a one-size fits all framework will not fit.”

House Speaker Michael Madigan agreed that Chicago and the state face similar problems when it comes to pensions. “Well, I think he delivered his message that the city pension systems need to be reviewed. They need to be examined. They’re not financially sustainable as they’re currently constituted. It’s very similar to what we’re doing here at the state level with the state pension systems. I’ve been very much involved in that. Same issues,” Madigan told reporters today.

The mayor came out strongly in favor of Quinn’s proposal to have school districts outside of Chicago take on some of the cost for teachers’ retirement. He said it is unfair that Chicago covers most of the cost for its teachers while school districts outside of the city do not. “Only taxpayers in Chicago pay for the pensions of their own teachers and those teachers statewide. If taxpayers in Northbrook or Springfield or Marion were faced with that kind of double duty, their mayors would not tolerate it. And as mayor of Chicago, neither will I.”

House Minority Leader Tom Cross said there are other funding inequities between Chicago and downstate that benefit the city, and any potential unfairness should be considered in the context of all state spending. Cross and other Republicans have been less than enthusiastic about the possibility of shifting costs to local school districts. Cross said it would do nothing to address the problem of the unfunded liability. Republicans who have been more vocally opposed have said that it would decimate school budgets.
Besides the call for a cost shift, Cross was supportive of Emanuel’s plan. “I like his concept. I like the governor’s concept. I like our concept,” Cross said. “We’re ready to go. We need to do this now.”

Unions decried Emanuel’s plan, saying that he is blowing the situation out of proportion. “What he’s trying to do is alarm the tax payer and pit them against the Chicago Police officers and the fireman that protect our city every single day,” said Michael Shields, president of the Fraternal Order of Police Chicago Lodge 7.
“A guy does 30 years, 27 years down the road you can’t just change the rules of the game for the employee. It’s an individual contract between the employee and the employer and you cannot reduce those benefits. It’s against the constitution in Illinois.”

Union officials say Emanuel sprung the proposal on them during today’s hearing and voiced frustration about not being asked for input in the mayor’s plan. “The unions representing city employees have repeatedly conveyed to the mayor our willingness to work constructively to solve the pension funding problem. Yet he has never once met with us to hear our views or put forward the suggestions he unveiled today,” Henry Bayer, executive director of the American Federation of State, County and Municipal Employees Council 31, said in a prepared statement. “No one has a bigger interest in assuring the fiscal stability of city pension funds than the retirees and employees who depend upon them. Our union remains committed to working toward a solution that is fair and constitutional, but we need an administration that shares our commitment to a collaborative process and a genuine solution.”

Emanuel said his “framework” is just the start of a discussion over pension reform for Chicago.
He said he would use all the political capital he may have with the legislature to help back reforms to both the state’s pensions systems and the city’s pensions systems through the legislative process this session. But, Emanuel said, getting something passed this spring is not a given.
“I never underestimate — given that you’re about to make change — the difficulties surrounding it,’ he said. “Because details matter.”

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